Saturday, November 16, 2013

Keep Your Liquid Wealth in Precious Metals

Everybody to a certain extent has to hold some national currency, because some bills have to be paid in the national currency in the country where you live. So you cannot avoid national currencies, but you don’t have to keep much of your liquidity. The liquid part of your wealth, you don’t have to keep much of your monetary needs in national currency.

You’re better off keeping the liquid part of your wealth in a precious metal than you are in any of the dollars. But this relates to the issue of, is your objective short term, or long term. From a short term point of view, holding gold and silver may not look like the best alternative because you do get movements of its price down, as well as up, for that matter. And that volatility can upset people in terms of what their requirements are for living expenses from month to month.

But from a long term point of view, you’re much better off owning any precious metal than you are owning any national currency. Because you don’t earn enough interest income on national currencies to offset the risks of holding them, to maintain your purchasing power in that national currency. Or to overcome the counter party risk that you have. That your bank might ultimately go under, and just like [happened] in Cypress earlier this year, you might lose 40, 50, 60% of your money in a bank bail-in.